Pakistan on Wednesday (January 1) drastically reduced the pension benefits of retired civil and armed forces personnel with the aim of containing a growing pension bill.

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According to Pakistani media, the finance ministry issued three separate notifications to discontinue multiple pensions, reducing both the first home take pension and also lowering the base for determining future increases in pensions.

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A report by The Express Tribune said the changes (in pension structure) would not apply to people who had already retired, except in cases where multiple pensions were being paid. 

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The changes in pension structure

The report said that instead of taking a pension based on the last drawn salary, new pensioners would get a pension based on the average salary of the last two years.

The changes in the pension structure came into effect from Wednesday itself. The changes were made based on the recommendations of a commission constituted by the previous Imran Khan government in 2020.

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The changes also end the annual compounding of the pension, and any increase would be treated separately from the base pension.

Pension is 4th largest expenditure in Pak's budget

Pension is the fourth largest expenditure in Pakistan's budget, coming after debt servicing, defence, and development.

It was reported last month that amid discussions over the increase in retirement age for selective positions, the government was examining reducing the average age of superannuation by five years to 55.

 (With inputs from agencies)